Know Your Loans

You can't manage your student loan debt unless you understand what you owe and how to pay. Make sure you know the balance on each of your loans, when payments are due, and where to send them. (If your lender offers an electronic payment option, sign up for it if you can. Your payments will never be late, and you may also qualify for a reduced interest rate.)

President Obama’s Pay As You Earn program has been in the news a lot. It’s an effective way for many student loan borrowers to lower their monthly payments -- but it’s not the only way. There are many options for relief from student loan debt, depending on what kind of loans you have, when you took them out, and what your financial situation looks like now.

Before you start exploring ways to shrink your monthly obligations, know that you should consider reducing or postponing your student loan payments only if the standard repayment plan (10 years for most loans) is truly out of your financial reach. more...

When you graduate from college, you usually won't have to start paying your student loans immediately. Most student loans include an automatic grace period of at least six months. But after that grace period ends, there are just two ways to delay student loan repayment -- deferment or forbearance.

Getting a deferment or forbearance can be a life saver if you have explored options for reducing your payments and still find yourself unable to meet your financial obligations. Still, you should use these postponement tools sparingly and with a full understanding of how they work. In many cases, interest will continue to accrue during a deferment or forbearance, and this can dramatically increase the amount you will have to pay later.

Undoubtedly, the most common student loan problem is owing more money than you can comfortably pay. If that’s what’s troubling you, read Avoiding Student Loan Default to learn how to make your debt more manageable.

Other student loan problems may be more administrative in nature, but some of them can be more than maddening -- they may wreak real havoc on your life. Such difficulties include:

lost or improperly credited payments

loans that are mistakenly placed in default

loans that are sold to another servicer without your knowledge

inaccurate information reported to credit bureaus

incorrect information in your loan records, or

collection agency harassment.

Take Steps to Resolve the Problem Yourself

For problems like these, the first thing to do is try to work things out with your loan servicer. more...

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If you have more student loan debt than you can comfortably handle, there may come a time when you're tempted to throw up your hands and stop making payments. Not so fast. The consequences of student loan default are harsh -- see What Happens If I Default on My Student Loans -- and defaulting will dramatically increase your debt headaches.

Here are some suggestions to help you stay out of default.

Getting Organized: Strategies for Managing Student Loan Payments

Sometimes people who have enough income to pay off their loans end up in default because of poorly organized records. You can take some simple steps to get your paperwork together and reduce the chances that a loan will fall through the cracks.

Consolidating your student loans may make it easier for you to live with them. At best, it could reduce your monthly loan payments, cut your interest rate, and ease the burdens of recordkeeping. At worst, it won't help with any of these concerns -- and it could cost you important benefits associated with your federal student loans.

If you're considering student loan consolidation, it's essential that you know the terms of your existing loans and understand how consolidation works before you proceed.

What Is Student Loan Consolidation?

Loan consolidation is a process that lets you replace multiple student loans with a new loan from a single lender. The interest rate on the consolidation loan will be based on the average interest rates of all the loans that you consolidate.

EXAMPLE: If you consolidate a $5,000 loan at 6.8% interest and a $10,000 loan at 6.0% interest, your new interest rate will be $6.375%. (To figure out the consolidation interest rate for your loans, you can use the FinAid Loan Consolidation Calculator.)

Most federal student loans default when the borrower fails to make payments for 270 days (nine months). Private loans may have different terms; they may default if you miss just one payment. Read your loan contracts carefully to be sure you understand when you're at risk for defaulting -- then do all you can to avoid it.

The following lists should convince you that defaulting on your student loans can lead to overwhelmingly negative consequences.

Student Loan Default: Consequences and Penalties

If your student loans go into default, here are some of the difficulties you may face:

Unlike many other states that impose consequences such as suspension of professional licenses or seizure of state lottery winnings, Pennsylvania does not currently subject residents to state-specific penalties for defaulting on their loans. State law does place limits on how much money the government can take from your wages, however. To learn about Pennsylvania wage garnishment law, see the Wage Garnishment page at Nolo.com.

Getting Your Federal Student Loans Out of Default

Paying off your loans. This is the fastest (and usually the least expensive) way to clear your default. Of course, if you could just pay off the debt, you probably wouldn't be in default. Most borrowers in default can't afford this option and must consider loan rehabilitation or consolidation.

Some companies or individuals may use deceptive or flat-out underhanded methods to try to get money out of student loan borrowers. Here are some things to watch out for:

Deceptive names, logos, or advertising. Some loan companies use material designed to fool you into thinking their program is part of the federal government's student loan program. Keep in mind that the Department of Education does not advertise, send out mailers, or otherwise try to encourage students to borrow money. If you receive a solicitation that looks like it's from the federal government, a private company is trying to mislead you.

If your student loans are canceled, you don’t have to repay them. To qualify for loan cancellation (also called "discharge"), you must meet very specific requirements that depend on the type of student loans you have and when you got them.

When you default on a student loan, you may be subject to a wide range of collection tactics -- from phone calls and letters to the loss of your tax refund or a portion of your wages. Student loan lenders, including the federal government, may hire private collection agencies to try to get you to pay back what you owe. You may even be sued.

As with any type of debt, you have legal rights when it comes to student loan collection activities. This article discusses some of the ways private collection agencies violate fair debt collection laws and what you can do if it happens to you.

Student loan forgiveness programs can bring great relief to borrowers who qualify, but they aren't a magic bullet. Usually, you must work hard for them, serving your community and making regular payments for years before your loans are erased. Folks who benefit from forgiveness programs usually work for low pay in jobs that help others -- for example, teachers, public defenders, or health care professionals working with populations in need.

Federal Public Service Loan Forgiveness Program

The best known and most widely used student loan forgiveness program is the federal government's public service program. The goal of the program is to encourage graduates to work full-time in public service jobs.

Under the program, the government will forgive a borrower's Direct Federal Loans after they have made 120 regular payments -- that's ten years' worth -- while working full time for a federal, state, or local government agency or for a nonprofit organization.

First things first. To get information or resolve a problem with a student loan, you need to know who holds it. This institution or company is usually called the loan "servicer." You’ll need to contact the servicer for just about any task related to your loan, including:

If you think you need a lawyer to help with your student loan troubles, slow down. Most repayment problems can be solved without a lawyer. A lawyer may tell you they can teach you about repayment options, help you lower or postpone your payments, reduce your interest rates, or get your loans forgiven. But consumer-friendly, no-cost resources exist to help you with all of these tasks and more.

Disputes with a loan servicer. If you run into difficulties with a loan servicer, you may be able to get help without calling a lawyer. Many free student loan ombudsman programs are available to help you resolve conflicts. For details, see "How to Get Help With Student Loan Problems."

If you default on a federal or private student loan and you don’t take steps to get out of default, you may be sued. A lawsuit is most likely if you have delinquent private student loans, because private lenders need a court judgment before they can use strong collection techniques like wage garnishment. The federal government has more immediate collection options than private lenders, so it brings lawsuits less frequently.

That said, it’s not safe to turn your back on your defaulted federal student loans and hope they’ll go away. Even if you don’t get sued, the consequences of default are harsh. What’s more, the government has forever to decide whether to sue you to collect your defaulted loans. Private lenders, on the other hand, are subject to a statute of limitations -- the time limit during which they can sue you. In Pennsylvania, the statute of limitations for suing on a delinquent student loan is usually four years.

If the worst happens and your loan holder sues you, here are a few things you should do.

Getting rid of student loans in bankruptcy is difficult -- but it’s not always impossible. To succeed, you must convince the court that repaying your student loans would cause you "undue hardship."

Bankruptcy: A Brief Overview

You probably already know that bankruptcy is a court procedure you can use to get your debts erased or reduced. But you may not know there are two different kinds of bankruptcy proceedings.

Liquidation (Chapter 7) bankruptcy. Chapter 7 is the most common type of bankruptcy. When you file for Chapter 7, you may have to surrender some of your property to pay creditors, but the end result is that most of your debt will be completely wiped out. But student loans are a big exception to this rule; you must file additional paperwork and meet a high standard to discharge your student loans in a Chapter 7 case.

The following table, adapted from the Federal Student Aid website, shows what types of federal student loans qualify for the most common income-driven repayment plans. Only federal loans can be repaid this way; private student loans are not eligible.

Most existing federal student loans came from just two loan programs: the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan (FFEL) Program. The FFEL program was canceled as of July 1, 2010, which means that loans made on or after that date are Direct Loans. Loans made between August 10, 1993 and July 1, 2010 may be either FFEL or Direct Loans, depending on the lender.

The basic difference between the two federal loan programs is that Direct Loans are funded by the U.S. Department of Education. FFEL Loans, on the other hand, came from private lenders. Those older loans were backed up ("guaranteed") by the federal government.

Types of FFEL Loans. The FFEL program was created in 1965. Under the program, student or parent borrowers may have received one or more of the following types of loans: Subsidized or Unsubsidized Stafford Loans (formerly known as Guaranteed Student Loans (GSLs) or Federal Insured Student Loans (FISLs), Federal PLUS Loans or Federal Consolidation Loans. Many FFEL loans have been sold to the U.S. Department of Education, so you may be currently paying off FFEL loans as if they were direct loans.

Types of Direct Loans. The Direct Loan program was created in 1993. Under the Direct Loan program, you may have received one or more of the following types of loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, or Direct Consolidation Loans. Direct Subsidized or Unsubsidized Loans were sometimes called "Direct Stafford Loans," but that terminology is not used for newer loans. You will repay these loans directly to the U.S. Department of Education.

Learn More

What is a PLUS Loan?

PLUS Loans are federal student loans for graduate and professional students and parents of undergraduates. PLUS loans made to parents can't later be transferred to the child. The parent who receives the loan must repay it.

Borrowers can take out PLUS Loans up to the cost of attendance, which is determined by the school, minus any other financial aid the student receives. For PLUS Loans made between June 30, 2013 and July 1, 2014, the interest rate was 6.41%. PLUS Loans made between June 30, 2014 and July 1, 2015 carry an interest rate of 7.21%

You must pass a credit check to obtain PLUS Loans. If you don't qualify on your own, you may be able to get PLUS Loans with a cosigner (the Department of Education calls this person an "endorser").

What is a Perkins Loan?

A Perkins Loan is a federal student loan for low-income undergraduate or graduate students. From July 1, 1972 until October 17, 1986, these loans were called National Direct Student Loans (NDSLs). Before July 1, 1972, they were known as National Defense Student Loans, or NDSLs.

The interest rate on Perkins Loans is lower than the rate for other federal student loans, and the loan comes with more flexible terms -- such as additional repayment and cancellation options. And Perkins Loans are subsidized by the federal government, meaning you don't pay interest on the loans while you are in school or during periods of deferment.

Also, unlike other types of federal student loans, Perkins Loans are made by your school, using a combination of school and federal funds. This means the school is considered your lender, and you should contact the school directly if you have questions about your loan.

For more information, see Perkins Loans on the Federal Student Aid website.

What if I don't know what kind of loan I have?

When it comes to managing student loan debt, most of your choices depend on whether your loans are federal or private. If you're not sure what kind of loans you have, use the National Student Loan Data System. Choose "Financial Aid Review" and supply the requested information to get a list of all federal loans made to you.

To use the system, you will need to supply:

your Social Security number

the first two letters of your last name

your date of birth, and

your U.S. Department of Education PIN number.

If you need to establish a PIN number, visit www.pin.ed.gov. (The PIN website can be frustrating. If you're having problems setting up, retrieving, or changing your PIN online, call 800-433-3243 for assistance. Press "0" to speak to a live person.)

Once you get to the list of your loans, you can click on each loan to get details about it, including exactly what kind of federal loan it is and who services it.

If you have student loans that aren't on the national database list, it means they are private loans. For more information, you'll need to contact the financial institution that made the loan.

What is student loan deferment?

A deferment allows you to temporarily stop paying your federal student loans. You qualify for a deferment if you meet certain conditions -- for example, if you are unemployed and looking for work, or if you return to school at least half time. If you are eligible for a deferment, you can postpone payment on both the principal and interest of your loans. In some cases, the federal government will even pay the interest for you. In other situations, interest continues to accrue during the deferment period.

What is student loan forbearance?

A student loan forbearance, like a deferment, allows you to postpone or reduce your federal student loan payments for a set period of time. However, it is often easier to get a forbearance than a deferment -- for example, you may qualify even if your loan is in default, or if you are experiencing financial hardship that falls short of conditions for deferment. The downside is that forbearance is usually more expensive than deferment. Interest always accrues during a forbearance, causing your loan balance to grow.

What is student loan default?

Default is what happens if you fall behind on your student loan payments. For most loans, if you fail to make a payment for 270 days (that's nine months) the loan will go into default. After that, your school, the loan servicer, or the government can take action against you to get back what you owe. You may face serious legal and practical consequences if you default on your student loans.

Can student loan debt ruin your credit report?

Skipping payments or defaulting on a student loan can have serious and lasting effects on your credit. When a delinquency or default notation appears on your credit report you may have more trouble with basic financial tasks such as:

Most negative information is removed from your credit report after seven years, but student loan defaults may remain on your record much longer. Defaults for a federal student loan may be reported for seven years after the most recent of the following dates:

How do I file a student loan complaint?

If you find yourself in a dispute with the holder or servicer of your student loan, you should first take steps to resolve the problem directly. If that doesn't work, the following services are available to assist you.

Filing a Federal Student Loan Complaint

If you're having difficulty with the lender or servicer of your federally guaranteed student loan, you can get help from the Department of Education. For guidelines, visit the Federal Student Aid Ombudsman website or call 877-557-2575.

Filing a Private Student Loan Complaint

If you're having trouble with private student loan company or a collection agency, you can turn to the Consumer Financial Protection Bureau (CFPB). The CFPB provides services to assist you in resolving complaints about your private student loans. For more information, visit the CFPB Student Loan Ombudsman website or all 855-411-2372.

Acceleration

Receive loan money, but do not enroll at least half-time at the school that determined you were eligible to receive the federal student loan;

Use your loan money to pay for anything other than expenses related to your education at the school that determined you were eligible to receive the federal student loan;

Make a false statement that causes you to receive a federal student loan that you are not eligible to receive; or

Default on your federal student loan.

Accrue

To accumulate interest on a loan.

Adjusted Gross Income (AGI)

You can find your Adjusted Gross Income on your most recently filed federal tax return: IRS Form 1040, 1040A, or 1040EZ.

Aggregate Loan Limits

A limit on the total amount of subsidized and/or unsubsidized loans that you may borrow for undergraduate and graduate study. If the total loan amount you receive over the course of your education reaches the aggregate loan limit, you are not eligible to receive additional loans. However, if you repay some of your loans to bring your outstanding loan debt below the aggregate loan limit, you could then borrow again, up to the amount of your remaining eligibility under the aggregate loan limit.

Alien Registration Number

The alien registration number or "A-number" is an identifying number that U.S. Citizenship and Immigration Services (USCIS) assign to certain non-citizens. A-numbers may consist of 8 or 9 digits. The A-number is yours for life, much like a social security number. The A-number may be found on your green card.

Annual Loan Limit

The maximum federal student loan eligibility per academic year. These amounts vary by type of loan and grade level. Your school will tell you how much you are eligible to receive each academic year. Specific amounts can be found at StudentAid.gov.

Annual Percentage Rate (APR)

The actual yearly cost of borrowing money reflected as a percentage rate.

Award Letter

A letter from your school that details your federal, state, institutional and private student financial aid.

Books, Supplies, Transportation, and Miscellaneous Personal Expenses

Includes reasonable amounts, as determined by your school.

Borrower

The individual who signed and agreed to the terms in the promissory note and is responsible for repaying a loan.

Capitalized Interest (Capitalization)

Unpaid interest that has been added to the principal balance of a federal student loan. Future interest is charged on the increased principal balance and this may increase your monthly payment amount and the total amount you repay over the life of the federal student loan.

Consolidation

The process of combining one or more loans into a single new loan.

Consumer Reporting Agencies

See credit bureaus.

Cost of Attendance (COA)

The total cost to attend school for the academic year, as determined by your school.

Credit Bureaus

A credit bureau collects the credit information of individuals and makes it available to financial institutions, credit card companies, etc. Credit bureaus are also known as consumer reporting agencies (CRAs).

Credit Score

A number reported by credit bureaus and used by lenders to determine whether to lend you money, and what interest rate to charge you.

Credit Report

A collection of information about you and your credit history, kept by the three major credit bureaus.

Debt Consolidation

When a borrower contracts with a third party company to manage his or her unsecured debt.

Debt-to-Income Ratio

The amount of debt compared to your overall income. Lenders use this ratio when determining whether to lend you money. A low debt-to-income ratio is more desirable.

Default

Failure to repay a loan according to the terms agreed to. For the FFEL and Direct Loan programs, your loan is in default if you fail to make a payment for 270 days, if you repay monthly (or 330 days, if your payments are due less frequently). Your lender is required to report the default to at least one national credit bureau.

Deferment

Allows you to temporarily stop making payments on your federal student loans. You are not charged interest on subsidized loans during deferment. Interest will continue to be charged on your unsubsidized loans and PLUS loans.

Delinquency

You become delinquent on a loan if you don't make a payment when due. Your lender is required to report the delinquency to at least one national credit bureau.

Dependent Child Care Expenses

The cost of care during periods that include but are not limited to class time, study time, field work, internships, and commuting time for the student.

Direct Loan

See William D. Ford Federal Direct Loan (Direct Loan) Program.

Disbursement

A portion of a federal student loan that the school pays out by applying the funds to the student's school account or by paying the borrower directly. Students generally receive their federal student loans in more than one disbursement.

Discretionary Income

Your adjusted gross income minus the poverty guidelines for your family size.

Eligible loans for the IBR plan

Eligible loans for the IBR plan are Direct Loan and FFEL Program loans other than: (1) a loan that is in default, (2) a Direct or Federal PLUS Loan made to a parent borrower, or (3) a Direct or Federal Consolidation Loan that repaid a Direct or Federal PLUS Loan made to a parent borrower. Federal Perkins Loans, HEAL loans or other health education loans, and private education loans are not eligible for the IBR plan. To access information on all of your federal student loans, check the National Student Loan Data System at www.nslds.ed.gov.

Eligible Loans for the ICR plan

Eligible loans for the ICR plan are Direct Loan Program loans received by an eligible new borrower other than: (1) a loan that is in default, (2) a Direct PLUS Loan made to a parent borrower, or (3) a Direct PLUS Consolidation Loan (these are Direct Consolidation Loans made based on an application received prior to July 1, 2006 that repaid Direct or Federal PLUS Loans made to a parent borrower). FFEL Program Loans, Federal Perkins Loans, HEAL loans or other health education loans, and private education loans are not eligible for the ICR plan. A Direct Consolidation Loan made based on an application received on or after July 1, 2006, including loans that repaid a Direct or Federal PLUS Loan made to a parent borrower, is eligible for the ICR plan. To access information on all of your federal student loans, check the National Student Loan Data System at www.nslds.ed.gov.

Eligible Loans for the Pay As You Earn Plan

Eligible loans for the Pay As You Earn plan are Direct Loan Program loans other than: (1) a loan that is in default, (2) a Direct PLUS Loan made to a parent borrower, or (3) a Direct Consolidation Loan that repaid a Direct or Federal PLUS Loan made to a parent borrower. FFEL Program Loans, Federal Perkins Loans, HEAL loans or other health education loans, and private education loans are not eligible for the Pay As You Earn plan. To access information on all of your federal student loans, check the National Student Loan Data System at www.nslds.ed.gov.

Endorser

Someone who does not have an adverse credit history and agrees to repay the federal student loan if you do not.

Expected Family Contribution (EFC)

Your Expected Family Contribution (EFC) is the number that's used to determine your eligibility for federal student aid. This number results from the financial information you provided in your FAFSA application. Your EFC is reported to you on your Student Aid Report (SAR).

Extended Repayment Plan

Under this plan, your monthly payments are:

fixed or graduated

made for up to 25 years

You must have had no outstanding balance on a Direct Loan and /or a FFEL Program loan as of October 7, 1998, or on the date you obtained a Direct Loan and/or a FFEL Program loan after October 7, 1998, and you must have more than $30,000 in outstanding Direct Loans or $30,000 in FFEL Program loans.

For example, if you have $35,000 in outstanding FFEL Loans and $10,000 in outstanding Direct Loans, you can choose the Extended Repayment Plan for your FFEL Loans, but not for your Direct Loans.

FAFSA

Free Application for Federal Student Aid. The FAFSA is a form that must be completed annually to help determine your eligibility for federal student aid. For more information, or to complete a FAFSA online for free, visit FAFSA on the Web.

Family Size

Family size includes you, your spouse, and your children (including unborn children who will be born during the year for which you certify your family size), if the children will receive more than half their support from you. It includes other people only if they live with you now, they receive more than half their support from you now, and they will continue to receive this support from you for the year that you certify your family size. Support includes: money, gifts, loans, housing, food, clothes, car, medical and dental care, and payment of college costs. For the purposes of these repayment plans, your family size may be different from the number of exemptions you claim on your federal income tax return.

Federal Student Aid PIN

A number used in combination with your Social Security Number, name, and date of birth to identify you as someone who has the right to access your own personal information on Federal Student Aid Web sites.

The FFEL Program ended July 1, 2010 and no new loans have been made since that date.

Final Divorce Decree

Document prepared by the court that has been signed and notarized, setting forth the terms and conditions of the divorce.

Financial Aid Package

The types and amounts of financial aid (federal and nonfederal) a student is offered by the school to help pay educational costs.

Financial Need

The cost of attendance minus your expected family contribution.

Forbearance

Allows you to temporarily stop making payments or reduce your federal student loans' monthly payment. Interest will continue to be charged on your subsidized, unsubsidized and PLUS loans.

Grace Period

A period of time that generally begins on the day after a borrower graduates, leaves school, or drops below half-time enrollment and ends on the day before the repayment period begins. A borrower is not required to make payments during the grace period. Grace periods occur for:

subsidized and unsubsidized loans made under the Direct Loan and FFEL programs (six-month grace period); and

loans made under the Perkins loan program (generally nine-month grace period).

Graduate or Professional Student

A student who:(1) Is not an undergraduate student; (2) Is enrolled in a program or course above the bachelors degree level or is enrolled in a program leading to a professional degree; and(3) Has completed the equivalent of at least three years of full-time study either before entering the program or as part of the program itself.

Graduated Repayment Plan

Under this plan, your monthly payments

start out low and increase every two years

are made for up to ten years (not including periods of deferment or forbearance)

will at least equal the amount of interest that accrues between your payments

won't be more than three times greater than any other payment

Grant

Student grants are monetary gifts to people who are pursuing higher education. Unlike student loans, grants do not require repayment.

Gross Income

Your total income before deductions.

Half-Time Enrollment

The minimum hours or credit hours you need to be enrolled to be eligible for a federal student loan. For information on half-time enrollment at your school contact your school's financial aid office.

Head of household

You are unmarried or 'considered unmarried' on the last day of the year.

You paid more than half the cost of keeping up a home for the year.

A 'qualifying person' lived with you in the home for more than half the year (except for temporary absences such as school). However, if the 'qualifying person' is your dependent parent, he or she does not have to live with you.

Holder/Loan Holder

An entity that holds your loan promissory note and has the right to collect from you. Many banks sell loans, so the initial lender and the current holder could be different. The holder(s) of your Direct Loans is the U.S. Department of Education (the Department). The holder of your FFEL Program loan(s) may be a lender, secondary market, guaranty agency, or the Department. Your loan holder(s) may use a servicer to handle billing, payment, repayment options, and other communications on your loans.

Income-Based Repayment Plan (IBR)

IBR is a repayment plan with monthly payments that are limited to 15 percent of your discretionary income. Discretionary income for this plan is the difference between your adjusted gross income and 150 percent of the poverty guideline amount for your state of residence and family size, divided by 12. To initially qualify for IBR and to continue making income-based payments under this plan, you must have a partial financial hardship (see definition).

Income-Contingent Repayment Plan (ICR)

ICR is a repayment plan with monthly payments that are the lesser of (1) what you would pay on a 12-year standard repayment plan multiplied by an income percentage factor or (2) 20 percent of your discretionary income divided by 12. Discretionary income for this plan is the difference between your adjusted gross income and the poverty guideline amount for your state of residence and family size.

Interest

The cost to borrow money. Interest is calculated as a percentage of the outstanding (unpaid) principal balance.

Interest Rate

The percentage charged when you borrow money. See also Annual Percentage Rate (APR).

IRS Data Retrieval Tool

The IRS Data Retrieval tool is an easy and secure way to access and transfer tax return information directly onto the electronic IBR/Pay As You Earn/ICR Request, saving time and improving accuracy. If you do not use the IRS Data Retrieval Tool to provide tax information, you must provide your servicer(s) with a copy of your tax return or obtain an official tax transcript from the IRS.

LIBOR

The London Interbank Offered Rate (LIBOR) is the average interest rate paid on deposits of US dollars in the London market.

Loan

Money that you borrow and must repay with interest.

Loan Discharge (Cancellation)

The forgiveness of a loan debt under certain circumstances.

Loan Fee (Origination Fee)

A fee charged for each federal student loan you receive that is a percentage of the total loan amount you are borrowing (gross amount). The loan fee is deducted proportionately from each disbursement of your loan. This reduces the actual loan amount you receive (net amount). The specific loan fee that you are charged will be included in a disclosure statement you will receive after the first disbursement of your federal student loan. You will be required to repay the gross amount.

Loan Forgiveness

The cancellation of a loan debt under various loan forgiveness programs.

Loan Modification Agreement

Temporary or permanent restructure of a mortgage loan.

Loan Period

The portion of the academic year that the loan is requested for.

Loan Reference Number

An identifying number associated to a Direct PLUS Loan Request. Used by an endorser when completing a Direct PLUS Loan endorser addendum for a specific loan.

Loan Servicer/Federal Loan Servicer

An entity that collects payments on a federal student loan, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a federal student loan on behalf of a loan holder. A federal loan servicer is a loan servicer for the U.S. Department of Education. If you have a Direct Loan, you will be assigned a federal loan servicer.

Master Promissory Note (MPN)

A legal document in which you promise to repay your federal student loan(s) and any accrued interest and fees to your lender or loan holder. There is one MPN for Direct Subsidized/Unsubsidized Loans and a different MPN for Direct PLUS Loans.

Most schools are authorized to make multiple federal student loans under one MPN for up to 10 years.

Borrower's Rights and Responsibilities Statement - The MPN contains a Borrower's Rights and Responsibilities Statement that explains the terms and conditions of the loan(s) you receive. It is very important to read and save this document because you'll need to refer to it later when you begin repaying your federal student loan(s).

Minimum Balance

The minimum amount of money a bank requires you to keep in your account to avoid fees.

My Annual Taxable Income

You must list all taxable income you are receiving this year (i.e., income from employment, unemployment income, dividend income, interest income, tips, alimony). Do not report untaxed income such as Supplemental Security Income, child support, or federal or state public assistance.

If you would like to use your most recent AGI and it was not available through the IRS Data Retrieval Tool, enter your AGI next to Your Annual Taxable Income.

National Student Loan Data System (NSLDS)

Any Title IV grant or loan you receive will be included in NSLDS. You can access NSLDS at www.NSLDS.ed.gov.

New Borrower for Pay As You Earn

A new borrower has (1) no outstanding balance on a Direct Loan or FFEL program loan as of October 1, 2007 or has no outstanding balance on a Direct Loan or FFEL program loan when you obtain a new loan on or after October 1, 2007, and (2) received a disbursement of a Direct Subsidized Loan, Direct Unsubsidized Loan, or student Direct PLUS Loan on or after October 1, 2011, or received a Direct Consolidation Loan based on an application received on or after October 1, 2011. However, you are not considered a new borrower if the Direct Consolidation Loan you receive repays loans that would make you ineligible under part (1) of this definition.

On-time

Payment made within 15 days of the scheduled due date.

Parental Contributions

Money your parents give you to help pay for educational expenses. Not the Expected Family Contribution (EFC) from your FAFSA.

Partial Financial Hardship for IBR

For IBR, you have a partial financial hardship when the annual amount due on all of your eligible loans or, if you are married and file a joint federal income tax return, the annual amount due on all of your eligible loans and your spouse's eligible loans, exceeds 15 percent of the difference between your adjusted gross income (AGI), as shown on your most recently filed federal income tax return, and 150 percent of the annual poverty guideline amount for your family size and state of residence: Annual amount of payments due > 15% [AGI - (150% x applicable poverty guideline amount)].

Partial Financial Hardship for Pay As You Earn

For Pay As You Earn, you have a partial financial hardship when the annual amount due on all of your eligible loans or, if you are married and file a joint federal income tax return, the annual amount due on all of your eligible loans and your spouse's eligible loans, exceeds 10 percent of the difference between your adjusted gross income (AGI), as shown on your most recently filed federal income tax return, and 150 percent of the annual poverty guideline amount for your family size and state of residence: Annual amount of payments due > 10% [AGI - (150% x applicable poverty guideline amount)].

Pay As You Earn Plan

The Pay As You Earn plan is a repayment plan with monthly payments that are limited to 10 percent of your discretionary income (the difference between your adjusted gross income and 150 percent of the poverty guideline amount for your state of residence and family size, divided by 12). To initially qualify for the Pay As You Earn plan and to continue to make income-based payments under this plan, you must have a partial financial hardship (and be a new borrower).

Perkins Loan

A loan made under the Federal Perkins Loan Program for students with exceptional financial need. Perkins Loans are administered by the school.

PLUS Loan

Direct PLUS Loans are loans for eligible graduate or professional students and eligible parents of dependent undergraduate students to help pay for the cost of the student's education at participating schools.*

Includes Direct PLUS Loans (made through the William D. Ford Federal Direct Loan Program) and Federal PLUS Loans (made through the Federal Family Education Loan Program.**)

Students' loan information doesn't include PLUS loans taken out by parents on their behalf.

* Graduate or professional students should exhaust unsubsidized and subsidized loans before taking out Direct PLUS Loans.

** The FFEL Program ended July 1, 2010 and no new loans have been made since that date.

Poverty Guideline

Poverty guideline amount is the figure for your state and family size from the poverty guidelines published annually by the U.S. Department of Health and Human Services (HHS). The HHS poverty guidelines are used for purposes such as determining eligibility for certain federal benefit programs. If you are not a resident of a state identified in the poverty guidelines, your poverty guideline amount is the amount used for the 48 contiguous states.

Prepaid Tuition

A Section 529 plan. Prepaid tuition plans let you lock in future tuition rates at in-state public colleges at current prices and are usually guaranteed by the state.

Prime

The interest rate banks charge their most creditworthy commercial customers.

Principal

The loan amount you borrowed plus any capitalized interest.

Rehabilitated Loan

A defaulted loan is rehabilitated if the borrower makes nine voluntary, reasonable, and affordable monthly payments within twenty days of the due date during ten consecutive months.

Repayment

To pay back money you borrowed by making scheduled payments to a loan holder or servicer.

Repayment Period

The maximum time period over which you must repay your federal student loan. The repayment period may range from 10 years to 30 years, depending on loan amount, loan type, and repayment plan.

Repayment Plan

A plan set up and agreed upon between a borrower and lender that determines the amount you pay each month and the number of payments you must make.

Room and Board

An allowance for the cost of housing and food while attending college or career school.

Satisfactory Repayment Arrangement

Agreement between the debtor and the account holder detailing the terms of repayment.

Standard Repayment Plan

Under this plan, your monthly payments are

a fixed amount of at least $50 each month

made for up to 10 years (not including periods of deferment or forbearance)

This repayment plan saves you money over time because your monthly payments may be slightly higher than payments made under other plans, but you'll pay off your federal student loan in the shortest time. For this reason, you will pay the least amount of interest over the life of your federal student loan.

Student Aid Report (SAR)

A summary of the information you submit on your Free Application for Federal Student Aid (FAFSA) that provides you with your Expected Family Contribution (EFC).

Student Loan

Money you borrow for school and must repay with interest.

Student Loan Debt Burden

Student loan debt burden is the portion of a student's monthly income dedicated to their student loan payments. The Consumer Financial Protection Bureau (CFPB) has the following categories for student loan debt burden:

Low: Monthly payment less than 8% of monthly income

Medium: Monthly payment between 8% and 14% of monthly income

High: Monthly payment greater than 14% of monthly income

Subsidized Loan

A federal student loan for which in some cases, a borrower is not responsible for paying the interest while in an in-school, grace*, or deferment period. Includes Direct Subsidized Loans (made through the William D. Ford Federal Direct Loan Program) and Subsidized Federal Stafford Loans (made through the Federal Family Education Loan (FFEL) Program**.)

* Interest will be charged during your grace period, if your loan is first disbursed July 1, 2012 through June 30, 2014.

** The FFEL Program ended July 1, 2010 and no new loans have been made since that date.

Tax Credit

Tax Deduction

Taxable Income

All income you are receiving this year (i.e., income from employment, unemployment income, dividend income, interest income, tips, or alimony). Does not include untaxed income such as Supplemental Security Income, child support, or federal or state public assistance.

Tax Return

A form submitted to the Internal Revenue Service (IRS) and your state government on an annual basis reporting your income for the year.

Tax Withholding Allowances

An allowance an individual claims on a W-4 Form. A withholding allowance is mainly used to assist an employer in calculating the amount of income tax to withhold from an employee's paycheck.

Tuition

The costs of teaching/instruction at an institution (e.g. the rental or purchase of equipment (including equipment for instruction by telecommunications), materials, or supplies required of all students in the same course of study).

Undergraduate Student

A student who is enrolled in an undergraduate course of study at a college/university or career school that usually doesn't exceed four years and that leads to an undergraduate degree or certificate.

Unsubsidized Loan

A federal student loan for which the borrower is fully responsible for paying the interest regardless of the loan status. Includes Direct Unsubsidized Loans (made through the William D. Ford Federal Direct Loan Program) and Unsubsidized Federal Stafford Loans (made through the Federal Family Education Loan (FFEL) Program*.)

* The FFEL Program ended July 1, 2010 and no new loans have been made since that date.

Untaxed Income

Income you do not pay taxes on, such as Supplemental Security income, child support, or federal, or public assistance, or you are not required to file a federal income tax return based on the amount of your taxable income.

Voluntary Payment

Payment made directly by the borrower and does not include payments obtained by federal offset, garnishment of income or asset execution.

William D. Ford Federal Direct Loan (Direct Loan) Program

Student loans provided by the U.S. Department of Education to enable a student to pay for education after high school. Eligible students borrow directly from the U.S. Department of Education at participating schools. Direct Loans include the following types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

About This Website

We built this website to get you the answers you need about getting out of student loan debt. When you choose your state or enter your zip code on our home page, you will quickly learn how to get organized so you can:

choose the right payment plan

lower or put off your monthly payments

cancel your student loans, if possible

avoid defaulting on your loans -- or get out of default if it's too late

get help with student loan problems, including finding a lawyer in Pennsylvania

file a complaint agains a student loan lender

and more.

Our goal is to guide you to reliable information about managing your loans, providing resources tailored for Pennsylvania when available.

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Legal Consumer

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After receiving his J.D. from the University of Michigan Law School in 1985, Albin worked for various public-interest law firms in the Bay Area and as a staff attorney for Chief Justice Rose Bird of the California Supreme Court. He spent 17 years as an editor at leading do-it-yourself legal publisher Nolo, where he helped create numerous books and software programs, including the bestselling Quicken WillMaker. He also edited Law on the Net, the first online directory of legal resources, and was the architect of Nolo's Webby Award winning website.